Margin in bank guarantee
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
15 August 2010
I want to know, what does a margin % mean while availing bank guarantee from financial institution,what is the purpose of margin and how is it calculated? Please provide me with an example.
VINOD ARORA
(Expert)
15 August 2010
in case the bank, while issuing guarantee asks the client to deposit some money as a counter security, the same is called margin money.
Let us take an example where a bank stipulates in the limit sanction letter that BG for Rs. 10000 shall be issued against margin of 25% by way of fixed deposit. Then client has to make deposit of Rs. 2500 and afterwards bank shall take risk of issuing BG of Rs 10000.
Let us take an example where a bank stipulates in the limit sanction letter that BG for Rs. 10000 shall be issued against margin of 25% by way of fixed deposit. Then client has to make deposit of Rs. 2500 and afterwards bank shall take risk of issuing BG of Rs 10000.
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